Traders enter a new week with more election uncertainty as Biden is pushed out and Harris gets the nod with just four months to make her case.  Although markets hate uncertainty S&P 500 futures saw a modest increase of 0.5%, following a challenging week where the index experienced its steepest losses since April. The shift came as investors moved away from Mega-cap technology stocks, opting instead for smaller-cap names. Meanwhile, futures for the Dow Jones Industrial Average and Nasdaq-100 also showed gains, rising by 0.2% and 0.7%, respectively. This movement indicates a cautious optimism among investors, despite recent market volatility.

On Monday, European stocks experienced an upward trend, with the pan-European Stoxx 600 index rising by 1.06% as of 11:29 a.m. London time. This positive movement was broad-based, with most sectors showing gains. However, the travel and leisure sectors were an exception, declining by 1.73%, making it the only sector in negative territory. This divergence highlights the varying performance across different industries within the European market.

Asia-Pacific markets experienced a downturn, influenced by unexpected monetary policy changes from China’s central bank. The People’s Bank of China reduced the short-term 7-day reverse repurchase rate from 1.8% to 1.7%. Additionally, the one-year and five-year loan prime rates were both lowered by 10 basis points, now standing at 3.35% and 3.85%, respectively. These rate cuts, aimed at stimulating economic activity, reflect ongoing concerns about China’s economic growth, which in turn impacted market sentiment across the region.

Economic Calendar

Earnings Calendar

Notable reports for Tuesday before the bell include BOH, IQV, TFC, & VZ.  After the bell include AGYS, AGNC, ARE, BOKF, BRO, CADE, CDNS, CALX, CATY, CLF, CCK, ELS, HSTM, MEDP, NUE, NXPI, RLI, SSD, WRB, & ZION.

News & Technicals’

On Sunday, the Atlanta-based airline faced significant operational challenges, canceling over 600 mainline flights, which accounted for approximately 17% of its schedule. This disruption was more extensive than any other U.S. airline. While most other carriers have managed to recover from similar issues, Delta continues to experience persistent disruptions, highlighting ongoing challenges within its operations.

On Monday, Ryanair shares plummeted by 12.2% as of 8:57 a.m. London time, following the company’s announcement of a 46% drop in quarterly profit after tax for the three months ending in June. The budget airline also projected lower-than-expected fares in the upcoming months, contributing to the negative market reaction. This downturn in Ryanair’s shares had a ripple effect on other European airlines, with EasyJet losing over 6%, Jet2 falling by 4%, and Hungarian airline Wizz Air sliding by more than 6%. The widespread decline underscores the broader concerns within the airline industry.

Bank of Japan officials are facing a challenging decision regarding potential interest rate hikes at their upcoming policy meeting, due to observed weaknesses in consumer spending. According to sources familiar with the matter, some officials believe that raising rates could send an overly hawkish signal, which they are keen to avoid. This internal debate highlights the delicate balance the BOJ must strike between supporting economic growth and managing inflation expectations.

In a seven-day period we had an attempted presidential candidate assassination attempt and the sitting president bow out of the run highlighting the extreme election uncertainty we face this November.  Toss in the earnings season and we have the makings for very turbulent price action.  GOOG will kick of the big tech reports on Tuesday with a looking GDP Thursday followed by the CORE PCE numbers Friday.  Fasten your seatbelt it may prove to be a bumpy ride.

Trade Wisely,

Doug